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Carbon Tax or Carbon Permits: The Impact on Generators Risks

Richard Green

Year: 2008
Volume: Volume 29
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-4
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Abstract:
Volatile fuel prices affect both the cost and price of electricity in a liberalized market. Generators with the price-setting technology will face less risk to their profit margins than those with costs that are not correlated with price, even if those costs are not volatile. Emissions permit prices may respond to relative fuel prices, further increasing volatility. This paper simulates the impact of this on generators� profits, comparing an emissions trading scheme and a carbon tax against predictions for the UK in 2020. The carbon tax reduces the volatility faced by nuclear generators, but raises that faced by fossil fuel stations. Optimal portfolios would contain a higher proportion of nuclear plant if a carbon tax was adopted.



Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?

Richard Green and Nicholas Vasilakos

Year: 2012
Volume: Volume 33
Number: Number 3
DOI: 10.5547/01956574.33.3.1
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Abstract:
Physical laws mean that it is generally impossible to identify which power stations are exporting to another country, but economic logic offers strong clues. On windy days, Denmark tends to export electricity to its neighbours, and to import power on calm days. Storing electricity in this way thus allows the country to deal with the intermittency of wind generation. We show that this kind of behaviour is theoretically optimal when a region with wind and thermal generation can trade with one based on hydro power. However, annual trends in Denmark's trade follow its output of thermal generation and are inversely related to Nordic production of hydro power and the amount of water available to Scandinavian generators, with no correlation with wind generation. We estimate the cost of volatility in Denmark's wind output to equal between 4% and 8% of its market value. Keywords: Electricity, Wind generation, Hydro generation, Storage, International trade



Market Design for Long-Distance Trade in Renewable Electricity

Richard Green, Danny Pudjianto, Iain Staffell and Goran Strbac

Year: 2016
Volume: Volume 37
Number: Bollino-Madlener Special Issue
DOI: 10.5547/01956574.37.SI2.agia
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Abstract:
While the 2009 EU Renewables Directive allows countries to purchase some of their obligation from another member state, no country has yet done so, preferring to invest locally even where load factors are very low. If countries specialised in renewables most suited to their own endowments and expanded international trade, we estimate that system costs in 2030 could be reduced by 5%, or €15 billion a year, after allowing for the costs of extra transmission capacity, peaking generation and balancing operations needed to maintain electrical feasibility. Significant barriers must be overcome to unlock these savings. Countries that produce more renewable power should be compensated for the extra cost through tradable certificates, while those that buy from abroad will want to know that the power can be imported when needed. Financial Transmission Rights could offer companies investing abroad confidence that the power can be delivered to their consumers. They would hedge short-term fluctuations in prices and operate much more flexibly than the existing system of physical point-to-point rights on inter-connectors. Using FTRs to generate revenue for transmission expansion could produce perverse incentives to under-invest and raise their prices, so revenues from FTRs should instead be offset against payments under the existing ENTSOE compensation scheme for transit flows. FTRs could also facilitate cross-border participation in capacity markets, which are likely to be needed to reduce risks for the extra peaking plants required.





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